CME Group Paves Way for Regulated Ethereum Futures with New Pricing Index

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CME Group, one of the world’s largest derivatives exchange operators, is taking steps that will prepare it to eventually list an ethereum futures product.

The Chicago-based exchange announced on Monday that it has partnered with a group of large cryptocurrency exchanges to create an Ether Reference Rate and Ether Real Time Index, which will provide standardized and audited pricing data for ETH/USD trading pairs, as well as a daily benchmark price.

“The Ether Reference Rate and Real Time Index are designed to meet the evolving needs of this marketplace,” said Tim McCourt, managing director and global head of equity products and alternative investments at CME Group. “Providing price transparency and a credible price reference source is a key development for users of Ethereum.”

Both the Ether Reference Rate and Ether Real Time Index will be calculated by UK-based trading platform Crypto Facilities, which last week launched the first regulated ethereum futures product. Pricing data will be supplied from two cryptocurrency exchanges: San Francisco-based Kraken and Luxembourg-based Bitstamp.

“Ether, the second largest cryptocurrency, experienced incredible adoption and growth in 2017, evolving into the leading blockchain for smart contracts,” said Dr. Timo Schlaefer, CEO of Crypto Facilities. “We are excited to be contributing to the strong community that has developed around the Ethereum network by providing a reliable reference rate and real-time Ether-Dollar price.”

The move paves the way for CME — which launched its first cryptocurrency futures product last December — to eventually list ethereum futures on its trading platform. This will provide institutional investors with more exposure to the nascent asset class, and it will give cryptocurrency miners with the ability to hedge their profits more effectively.

As CCN reported, CME launched a reference rate and pricing index for bitcoin in 2016, more than a year before it became the second US exchange to list a futures product for the flagship cryptocurrency.

CME’s bitcoin futures product has seen a gradual uptick in trading volume since its launch, and this market has seen as much as $500 million in volume during a single trading session. However, the launch of this product also correlated with a sharp decline in the bitcoin price, as Federal Reserve researchers noted in a recent report.

Josiah is a full-time journalist at CCN. A former ancient and medieval literature teacher, he has been reporting on cryptocurrency since 2014. He lives in rural North Carolina with his wife and children. Follow him on Twitter @Y3llowb1ackbird or email him directly at josiah.wilmoth(at)ccn.com.